 "Trent")
Shares of Trent hit a new high of Rs 4,669.95 as they rallied 7 per cent on the BSE in Tuesday's intraday trade after the Tata Group company reported stellar earnings in the January-March quarter (Q4FY24). Its standalone revenue jumped 53 per cent year-on-year (Y-o-Y) to Rs 3,186.93 crore in Q4 on the back of 10 per cent LFL and 37 per cent Y-o-Y store additions.
The company's profit before tax (PBT) before exceptional items more-than-doubled to Rs 316 crore from Rs 125 crore in Q4FY23. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) grew 2.3 times Y-o-Y to Rs 480 crore, led by gross margin improvement and operating leverage in other expenses. Margins rose 480bp Y-o-Y to 15.0 per cent.
Trent’s profit after tax (PAT) jumped six-fold to Rs 654.28 crore from Rs 105.13 crore in the year-ago quarter. During the reported quarter, the term of leases has been reassessed, resulting in an exceptional gain of Rs 543 crore, and the same has been recognised as an exceptional item, Trent said in release.
Trent is part of the Tata Group and operates a portfolio of retail concepts. The primary customer propositions of Trent include Westside, one of India's leading chains of fashion retail stores; Zudio, a one stop destination for great fashion at great value; and Trent Hypermarket, which operates in the competitive food, grocery and daily needs segment under the Star banner.
Thus far in the calendar year 2024, the stock price of Trent has appreciated by 53 per cent as compared to 3.7 per cent rise in the S&P BSE Sensex. In the past six months, it has zoomed 120 per cent as against a 17 per cent rise in the benchmark index.
Trent's strong performance with 10 per cent LFL growth and robust footprint additions is an outlier in our retail coverage universe, which is facing a challenging demand environment. Unlike peers that passed on the sharp RM price increases last fiscal, Trent absorbed the impact, seeing strong customer reception, and is now reaping the benefits as RM prices turn benign, Motilal Oswal Financial Services said in their result update.
Trent’s industry-leading revenue growth, driven by healthy SSSG and productivity, robust footprint additions, and healthy scale-up in Zudio, offers a huge runway for growth over the next three to five years. "We assign 50x EV/Ebitda to the standalone business (Westside and Zudio; premium over our retail coverage universe, given its superior growth), 2x EV/sales to Star Bazaar, and 15x EV/Ebitda to Zara on FY26E, and arrive at our target price of Rs 4,870," the brokerage firm said.
